Why entrepreneurs should mind the gender pay gap

Companies have been left sweating following gender pay gap reporting at the start of April but it could bring about workplace equality like never before

With men traditionally paid more than women, the gender pay gap debate has waged on for years. And it’s not just a UK business issue but a global epidemic as we’ve seen Hollywood stars like Jennifer Lawrence condemn uneven rates of pay for actors and actresses. One of the most notable examples of Tinseltown inequality was for 2018 film All the Money in the World, which saw Mark Wahlberg reportedly paid $1.5m for reshoots compared to co-star Michelle Williams’ paltry $1,000.

Just think: these are rich and powerful women known globally and they’re still being short-changed, so just how bad is the climate for the UK everywoman? We now have a clearer idea of that than ever before. Tuesday April 4 2018 brought about a new change to the way British businesses operate as companies with over 250 employees were legally required to publish the differences in average hourly pay between men and women.

Championed by the Government Equalities Office, gender pay gap reporting came into effect as part of The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017. According to the BBC’s number-crunching of the government data, which is based on the 10,000 employers that reported, the median pay gap is 9.7% in favour of men.

Despite this attempt to make groundbreaking change to create even footing, the Equalities and Human Rights Commission revealed almost 1,600 companies missed the deadline. This only highlights the uphill struggle that women have faced as it would seem these firms aren’t taking the issue seriously. The consequence of their actions, or inactions, means they will be named and shamed by the government and face legal steps.

While many startups won’t yet have crossed the 250-employee threshold, the gender pay gap should still be at the forefront of their minds for forging an ethical working environment free of discrimination. And knowing the sudden rate of scale SMEs can experience, they could well find themselves required to participate in gender pay gap reporting before long, which inevitably will swing open the doors to any skeletons lurking in the closet.

“Gender pay gap reporting will eventually trickle down to smaller firms,” claims Jonathan Richards, CEO at breatheHR, the HR software provider, reinforcing the importance of the legislation. “This is shining a spotlight on some poor workplace cultures and inequalities across the UK. SMEs should learn from the mistakes of bigger businesses, that have arguably left it too late, and start thinking about their internal equality now.

To that end, Richards noted that startups should incorporate inclusiveness into their values from day one to ultimately prevent upset and unfair treatment further down the line when a culture is already embedded. He reckons the issue is that startups often recruit on a ‘who you know’ basis before a proper employment procedure and guidelines are enforced, which are essential as the company grows.Something that should be eliminated altogether from the employment procedure is the question: ‘what’s your current salary?’ according to Adrian O’Connor, founding director of Global Accounting Network, the specialist recruitment business. Although it provides bosses with a benchmarking opportunity to prevent deterring candidates by aiming too low, it also means they’re able to get away with paying less even if their budgets can allocate higher wages. So perhaps it’s time the UK takes inspiration from the US.

“Talking pay can be a minefield,” O’Connor says. “Interviewees who rapidly spill the beans on their existing take-home pay risk either undervaluing themselves or pricing themselves out of the role before they’ve had the chance to sell themselves. The practice means that existing pay gaps can persist as individuals move roles – and if employers continue to ask about current salary the cycle will never be broken. Even companies that are non-discriminatory can be unconsciously perpetuating the gap. There is certainly an argument for following in the footsteps of New York City, New Orleans and Oregon and banning the question to help narrow the gender pay gap.”As a business not in the gender pay reporting territory, Global Accounting Network has a method in place structured around employee experience to prevent gender as a factor entirely. “Base salaries should be set in line with internal and external benchmarks, not on historical pay,” O’Connor says. “We have several clients who routinely offer a 10% increase on existing pay when hiring and this is a practice that will impact the ability to address the pay gap issues.”

Missive, the PR agency, is another small business without a gender pay gap favouring men. In fact, the needle would lean towards women instead but this is solely because eight of the 11 full-time staff employed are actually female, explains CEO Emma Ross.

Like O’Connor, Ross agrees pre-defined salary bands across roles are the way forward but there’s more to the picture than just evening out money. “Parental leave and truly flexible working should be granted and equal for all employees, regardless of who they are and what their personal circumstances might be. I would expect this to be true of both startups and large organisations,” she says.

Commenting on some of the results revealed from the gender pay reporting, Ross adds: “Ryanair is particularly shocking, with median hourly pay sitting at 71.8% lower for women than men. On the other side of the coin, looking a mean hourly pay, Channel 5 has a gender pay gap of only 2.9% in favour of women; Ocado has a gender pay gap of 1.4% in favour of women; and the British Museum pays male and female staff exactly the same amount. These positive examples show that an equal footing is possible.”

FDM Group, the IT services business, has 3,000 employees and is proud to have reported a 0% gender pay gap. Sheila Flavell, COO, admits that tackling gender pay can be particularly challenging, especially when many women take time out or adapt working hours for family commitments. But in her experience, the first step should be to admit there is a problem and lay out a clear strategy to manage it.“We’ve launched a dedicated women returners programme, provided mentoring and support and worked hard to recruit a highly diverse workforce to attract women into the business,” says Flavell, declaring that it’s “unacceptable” women are often in lower-paid roles compared to men who can be found in higher-paid senior positions.

“It’s not just a moral issue – businesses which are complacent around diversity will struggle to thrive in an increasingly competitive, global marketplace,” she continues. “Women bring so many skills and insights into the workforce, so they must be incentivised to enjoy all the benefits of employment, safe in the knowledge that they are being paid properly for the job they do.”

It’s encouraging that there are companies out there doing the right thing by removing gender from the equation for pay. And for those businesses that haven’t, it’s more than apparent there’s nowhere for them to hide, which could be just the motivation needed to create positive change and workplace equality that are sorely needed.

About the Author

As editor, Terrelonge can be found on the hunt for all things startup and scaleup – that's when he's not busy talking babies via DADult Life. Whether it's health or hospitality, food or philanthropy, tech or travel, he'll be seeking out the most interesting entrepreneurial developments to run in the magazine and online.